On November 30, 2023, a “sale pending” sign will be posted on a home for sale in San Anselmo, California.
Justin Sullivan | Getty Images News | Getty Images
Signed sales contracts for existing homes fell 7.7% in April from March, the slowest pace since April 2020, according to the National Association of Realtors.
These so-called pending sales are a forward-looking indicator of the closed sales one to two months later. Current sales were 7.4% lower than in April last year.
Sales were expected to remain flat compared to March.
Because the count is based on signed contracts, it shows in real time how buyers are reacting to mortgage rates. The average rate on the 30-year mortgage ended March at about 6.9% and then rose to 7.5% at the end of April, according to Mortgage News Daily.
Because house prices are still rising and supply is very low, leading to more competition, the interest rate increase had a huge effect on sales.
“The impact of rising interest rates in April dampened home purchases even as there was more inventory on the market,” said Lawrence Yun, NAR's chief economist. “But the Federal Reserve's expected rate cut later this year should lead to better conditions, with better affordability and more supply.”
Sales fell in all regions of the country, but fell most in the Midwest and West. The former has some of the most affordable markets in the country, and the latter has some of the most expensive.
“The prospect of measurable home price declines appears minimal. The few markets that experience price declines will be seen as second-chance opportunities for buyers to enter the market as those regions continue to add jobs,” Yun added.
Perhaps in response to the slow pace of sales in April, the share of sellers who cut prices in May reached 6.4%, the highest level since 2022, according to a new report from Redfin. The average asking price also fell for the first time in six months.
According to Realtor.com, active inventory in April was 30% higher than in April 2023, suggesting the summer market could be more active than last year.
“While inventory and prices are moving in a more buyer-friendly direction, lower mortgage rates will be key to bringing both buyers and sellers back into the market,” said Hannah Jones, senior economic research analyst at Realtor.com.
